Real Estate & Construction

Strong Foundations


Fuelled by an average annual growth rate of over 7% in recent years, Mozambique's construction sector is flourishing.

The construction sector grew by nearly 10% and contributed some 3.5% to GDP in 2014, according to BMI Research in its 2015 Mozambique Infrastructure Report. There is an estimated $30 billion worth of infrastructure projects in the pipeline. Still, BMI expected sector growth to slow down to some 6% in 2015 and an annual average of 4.3% over the next decade. BMI has warned that the government’s growing budget deficit could limit future financing.

The budget deficit decreased from 4.1% of GDP in 2012 to 2.9% in 2013. “But in 2014 the budget deficit is estimated to reach double digits (…) and push public debt from 41% of GDP in 2013 to 47% of GDP, driven by higher spending on infrastructure and security,” the Rabobank Mozambique Country Report concluded in November 2014.

While Mozambique may face some financing restraints in the short term, the country, blessed with some of the world’s largest gas and coal reserves, seems to have a glorious future in the long term. To accelerate growth and further attract foreign investments, the government has earmarked improving the country’s ailing infrastructure as a key priority.

Small wonder, as the World Economic Forum in 2014 ranked Mozambique 126th in the world in terms of the quality of its infrastructure. The country, for example, has only three major ports, and two main railways, while up to 80% of its roads remain unpaved. In contrast with the state-led economy of yesteryear, Mozambique since 1992 has increasingly embraced private initiatives and public private partnerships as a means to move forward and build anything from dams and electricity plants to factories and ports.


“Investment, especially in megaprojects, boosted growth, accounting for an estimated 2-4 percentage point increase in growth in each year of active construction,” the IMF concluded in its 2014 Mozambique’s Growth Experience report. In 1993, Mozambique introduced a law offering attractive tax incentives and other benefits to such large-scale investments.

The tone was set in the late 1990s by South Africa’s Trans-Africa Projects’ rehabilitation of the Cahora Bassa hydropower station, BHP Billiton’s construction of the Mozal aluminum smelter, and Sasol’s development of the Temane gas field. These projects showed foreign investors that Mozambique, after years of war, was a safe destination. The coming wave of megaprojects is mainly related to infrastructure, mining, and energy.

One issue facing the country is how to cost-effectively transport and market its many natural resources. For example, a study is underway regarding the construction of a $6 billion gas pipeline to South Africa. To boost the country’s coal export capacity to some 80 million tons annually, the government in 2013 signed a $4.5 billion contract with Italian-Thai Development (ITD) to construct a 537km railway line from the Moatize mines to a new coal terminal in the port of Marcuse.

The project is facing some financing issues due to a decline in the global price of coal. Nevertheless, the Brazilian mining company Vale is pushing ahead with its $4.5 billion project to construct a 900km railway from the Moatize mines to Nacale port. In December 2014, the Japanese firm Mitsui agreed to invest nearly $1 billion in Vale, of which $313 million were earmarked for a stake in the Nacala rail and port project.

One of the biggest projects on the horizon is the Palma “City of Gas.” Situated on the north-eastern coast, this tiny fishermen’s town is to become the beating heart of the gas industry that will tap into the offshore Rovuma Basin. The project’s price tag amounts to $50 billion, as drilling wells and building two LNG plants alone could cost up to $16 billion. The future city will be home to some 250,000 people.

Improving the country’s infrastructure, however, is not all about transport. On August 22, 2014, the government signed two contracts worth some $1.6 billion to construct dams on the Zambezi River to generate over 800MW of electricity. And a consortium of Korean firms is to complete the construction of the 600-bed Quelimane Central Hospital in 2015, as the government is well aware that infrastructure has a social component too.

The United Nations Conference on Trade and Development (UNCTAD) in 2011 published an investment policy review on Mozambique, in which it praised the role megaprojects had played in kick-starting the country’s economy following years of war. However, it also warned of a lopsided economy.

“The regulatory bias in favor of mega-projects (unintentionally) crowds out smaller investments,” according to James X Zhan, Director of the UNCTAD Investment and Enterprise Division. “Small to mid-sized investments could contribute more meaningfully to achieve social objectives such as creating employment and distributing economic activity more widely.” UNCTAD recommended Mozambique to “level its regulatory playing field” to also encourage smaller investments that could be beneficial to a much larger part of the population.


Symbolic for Mozambique’s towering ambitions is the construction of the bridge across Maputo Bay blessed with “the largest single suspended span on the African continent.” The $725 million project, which includes the construction of the Maputo Ring Road (ECM), was largely funded by loans from the China Export-Import Bank. A Chinese firm has nearly completed the 74km road network, while construction of the 3km-long landmark bridge is set to start in 2015. Another major project in the capital is the $500 million expansion of Maputo port.

Mozambique’s rapid growth and spur in investments have attracted scores of migrant workers, both from rural areas and abroad. Most head to Maputo and its surroundings. Currently, Maputo and neighboring Matola are home to some 2.5 million inhabitants, which is expected to increase to over four million by 2025. As a result, the capital’s skyline is being transformed into a silhouette of high-rise residential and commercial towers.

The high-end property market in particular has witnessed rapid growth. Maputo’s Polana Caniço district, for example, is now home to a thriving expatriate community. Rental prices have doubled in recent years. The rent of a 3-bedroom apartment amounts to an average of $3,000 a month or more, while purchasing the same property may cost $500,000.

To meet the growing demand for luxury housing, dozens of projects are under construction. A typical example is the $45 million Maputo City Tower. Construction of the 27-story building offering 135 luxury apartments, as well as office and retail space, started in April 2014. A partnership between the government’s Housing Promotion Fund (FFH) and Dubai’s Signature Group, the tower is set to be completed within 30 months. Signature Group in 2014 also started construction of some 1,200 homes in Chiuba Village in Pemba.

It should be noted, however, that most housing construction in Mozambique is of an informal nature. Some 75% of the urban population lives in so called “bairros,” which are extremely basic concrete shelters. In rural areas many people still live in straw huts. In order to create a more mature market, it does not help that the credit market as a whole, including mortgage and construction loans, remains underdeveloped.


The informal nature of most housing demand is mirrored in the market’s supply side, which consists of both formal and informal operators. The latter dominate the housing market, while the formal market for mega projects and building materials is largely in the hands of a few large foreign companies from Portugal, South Africa, China, and Italy. One of the few major domestic players is the formerly state-owned firm CETA.

In 2012, the International Growth Center (ICG) published a white paper on the construction sector concluding that the domestic industry had hardly been able to break into the formal market. It even stated that the current construction boom may represent a “lost opportunity” for the country’s construction sector.

“The supply response by domestic construction firms and the overall building materials industry remains weak,” the ICG wrote. “The demand for construction services is generally undertaken by foreign construction firms in view of their size and experience in international markets, while construction materials and other related inputs are generally imported. As a result, relatively few Mozambican firms have entered the market, and those that have typically end up performing low value-added works.”

Causes include: weak credibility due to the lack of experience and track record, multiple and lengthy bureaucratic procedures concerning state ownership of land and construction permits, limited access to credit, limited use of modern technology, and a lack of qualified manpower.

Another characteristic of the market is that, despite the relatively low cost of labor, the total cost of construction is relatively high. According to the ICG, construction costs in Maputo in 2012 were on average over 30% higher than in South Africa. Material costs account for over 50% of the total costs, as most valuable materials need to be imported. For high-end construction nearly 90% must be imported. Only basic materials, including cement and wood, are produced locally.

Regarding cement, Mozambique is home to a number of manufacturers with a combined output of some 1.2 million tons in 2012. As consumption in 2012 amounted to some 1.6 million tons, the country still relied on imports. “Cement consumption is projected to increase by a compound annual growth rate of 10.7% between 2012 and 2017,” the research firm CW Group concluded in 2013.

The government has responded by the construction of new production units, while it is pondering the introduction of an import quota system to protect local operators. Illustrative for the promising market prospects in years to come is Germany’s HeidelbergCement AG, Africa’s 4th and the world’s 3rd largest producer, which on March 5th, 2015, announced that it is considering an investment in Mozambique and South Africa to meet growing demand in the whole of southern Africa.

With an eye on the overwhelming presence of mineral and energy resources, as well as the infrastructure needed to properly exploit them, the Mozambique building boom is likely to continue for some years to come. This includes an increased demand for high-end residential and commercial property. On an institutional level, lengthy procedures and red tape remain subject to improvement, while for the domestic sector to profit from the building boom, better education and vocational training is required to improve the quality of manpower.

You may also be interested in...



Diving in

Scuba diving in Mozambique

View More

Real Estate & Construction

Chin up

Challenges for the future

View More


On the right track

Reforming the agricultural sector

View More


The port of choice

The Port of Nacala

View More
The road to prosperity

Telecoms & IT

The road to prosperity

Internet access

View More
Come get involved


Come get involved

Financial inclusion

View More
Beer battles


Beer battles

Breweries in Mozambique

View More
A united front


A united front

Cabo Delgado insurgency

View More
Between a rock and a hard place


Between a rock and a hard place

Mozambique versus COVID-19

View More
View All Articles